2007 (12) TMI 29 - AT - Customs

EXIM policy provisions current during material time allowed availment of credit of CVD only if the same was paid in cash & not by debit in DEPB penalty not imposable as assessee had bonafidely believed that it was eligible to avail credit of CVD paid through DEPB scrips

Summary

Issues:
1. Modvat credit on additional customs duty paid through DEPB scrips.
2. Imposition of penalty for non-compliance with statutory provisions.

Analysis:
1. The appeals involved a dispute regarding the modvat credit availed by the appellants against additional duty of customs discharged between June'98 to September'98 using DEPB scrips on imports of inputs. The Commissioner (Appeals) confirmed the demand for the modvat credit but vacated the penalty imposed on the appellants. The assessee relied on a Tribunal decision allowing modvat credit for customs duty paid through DEPB scrips. However, the Tribunal referred to a previous decision which held that availing the benefit of exemption under a specific notification did not entitle the importer to modvat credit. The Tribunal dismissed the appeals filed by the assessee based on this precedent, emphasizing that the Exim Policy provisions at the relevant time did not allow modvat credit for customs duty paid through DEPB scrips.

2. The Revenue also filed appeals seeking restoration of the penalties imposed on the assessee. The department argued that mens rea (intent) was not necessary to impose a penalty for non-compliance with statutory provisions. The authorized representative of the assessee contended that the penalty was not justified as the assessee believed in good faith that they were eligible for modvat credit. They cited Tribunal decisions supporting their position, but the Tribunal noted that there was inconsistency among different benches on the issue until the Larger Bench resolved it. The Tribunal held that the assessee's actions did not amount to willful defiance of the law, citing a Supreme Court decision emphasizing that penalties should be imposed for deliberate defiance, not technical breaches or bona fide beliefs. Consequently, the Tribunal upheld the lower appellate authority's decision to vacate the penalty, ruling in favor of the assessee.

In conclusion, the Tribunal dismissed all four appeals, maintaining the decision to deny modvat credit for customs duty paid through DEPB scrips and upholding the vacating of the penalty imposed on the assessee.